MMC Corp Bhd plans to take Johor's top water concessionaire, Aliran Ihsan Resources Bhd (AIRB), private in a deal valued at RM181.12 million, or RM1.84 a share.
AIRB, which is 62.82 per cent-controlled by MMC, is the third largest supplier of treated water in the country.

These companies are involved in the operation, maintenance and management of water treatment plants, rehabilitation of water treatment plants and construction of water works.

The offer price of RM1.84 by MMC is a five per cent premium on AIRB's closing price of RM1.75 last Friday. Based on the closing price, AIRB's market capitalisation was RM463 million.

The securities of both MMC and AIRB were halted from trading yesterday. MMC closed last Friday at RM2.61.

In a filing to Bursa Malaysia yesterday, MMC said it planned to take AIRB private via a selective capital reduction and repayment exercise.

The plan will result in the reduction of the issued and paid-up share capital of the company from RM264.74 million, or 264.7 million shares, to RM83.8 million, or 83.6 million shares.

This is by way of cancelling 181.1 million shares comprising all outstanding AIRB shares amounting to 98.4 million held by the shareholders and 82.7 million held by MMC.

MMC said upon the completion of the exercise, it would hold 83.6 million AIRB shares, representing the entire issued and paid-up capital of the company.

MayBank Investment Bank Bhd is advising MMC on the deal.

MMC Corp group managing director Datuk Hasni Harun said the privatisation exercise was timely, given the near-term expiry of its main concession/contract, coupled with the illiquidity and lower trading volume of AIRB shares.

"This move will allow MMC to fully consolidate AIRB's earnings into its accounts and also enable both companies to derive more benefits from each other," he said in a statement.

The proposed selective capital reduction and repayment initiative is expected to be completed by the first quarter of 2013.

Besides AIRB, MMC's other core businesses are Port of Tanjung Pelepas (Malaysia's largest container terminal), Johor Port (the country's leading multi-purpose port), and Malakoff Group Bhd (the largest local independent power producer).

It also has interest in Gas Malaysia Bhd (sole supplier of natural gas to the non-power sector) and Senai Airport Terminal Services Sdn Bhd, among others.

Upon completion of the proposed SCR, expected to be by the first quarter of 2013, MMC would emerge as the sole shareholder of AIRB, whose other significant shareholders at present include Lembaga Tabung Haji, Effective Strategy Sdn Bhd and Public Dividend Select Fund.

In a statement to Bursa Malaysia, MMC explained that the proposed SCR entailed a reduction of the issued and paid-up share capital of AIRB from RM264.7mil, represented by 264.7 million units, to RM83.6mil, represented by 83.6 million units by way of cancelling a total of 181.1 million AIRB shares.

Shares to be cancelled comprised the 98.4 million units held by the shareholders other than MMC, and 82.7 million units held by MMC.

Upon successful completion of the proposed SCR, MMC said it would hold the entire remaining 83.6 million shares in AIRB, resulting in the latter becoming a wholly-owned subsidiary of MMC.

It would delist AIRB from Bursa Malaysia.

MMC said pursuant to the proposed cancellation of 181.1 million AIRB shares, qualified shareholders would be entitled to receive a capital repayment of RM181.1mil, which was equivalent to RM1.84 per AIRB share, while MMC would waive its own entitlement for the capital repayment of RM82.7mil under the proposed SCR.

The capital repayment exercise would be funded through the internal funds of AIRB.

“The intention of privatising AIRB is timely given the near term expiry of AIRB's main concession/contract, coupled with the illiquidity and lower trading volume of AIRB shares,” MMC said in a statement.

“This move will allow MMC to fully consolidate AIRB's earnings into its accounts and also enable both companies to derive more benefits from each other,” it added.

It was noted that the bulk of AIRB's operating revenues are generated from its concession-related businesses, namely, Southern Water Corp Sdn Bhd (SWC), Equiventures Sdn Bhd (ESB) and Aliran Utara Sdn Bhd (AU).

The concession/contract for SWC and AU would be expiring within the next 24 to 28 months, while the concession for ESB had already expired last month.

Both MMC and AIRB were suspended from trading yesterday. AIRB was last traded at RM1.75, and MMC at RM2.61.